|Annualized lending rates, source: coinlend|
Why? Here are some of the reasons why I lend a portion of my crypto holdings.
- Passive returns
Earning interest on your crypto currency holdings is almost just like any other loan. You don't have to actively trade to make a return on investment. Also if you hodle coins, this is a way to make some extra passive income on your holdings.
- High yields possible
Some coins offer at times extremely high yields, but most of the times just high yields. BTC can be loaned out at an average rate of 7% per year or more and the US-Dollar mostly above 20% annually.
Of course with high yields come higher risks, then with your average savings account. Basically there are two types of risks that you are opening yourself up to:
- Counter party risk
- Lending out your crypto currency on an exchange means you will lose control over your private keys as you need to hold your cryptos on an exchange. You need to trust the exchange to handle not only the loan, but also your cryptos carefully. Exchanges can and have been hacked. So you could potentially lose all your coins held at an exchange due to hacks or wrong doing by the exchange.
- Also huge market turns can have traders that loaned your coins default on their debt, although the exchange have mechanisms in place to take trader automatically out of trade in time to cover their debts.
- Opportunity loss risk
You will loan out your coins for a minimum of 2 days. As they are loaned out, YOU cannot sell your coins if you anticipate an opertunity to buy them back later for a better price. So you are risking to miss out on some opportunities.
So where can you lend your Crypto currencies?
I know of these two exchanges:
Probably there are other exchanges as well, but these are the two that I use.
Both exchanges have the possibility to auto-renew your loan offers at the rate you specified. However, crypto markets and therefor interest rates can change really quickly. You can optimize your lending by using a bot that will automatically renew your loan offers at the best possible rates.
There are two ways of doing this:
- using an online free service: www.coinlend.org
- run your own lending bot: https://github.com/davetromp/poloniexlendingbot
I ran my own (clonned) bot on my own server until I discovered Coinlend. In the video I show how I use this service. I did not go into setting up the service. Let me know in the comments below here or on youtube if you would find it helpful if I would show how to do this.
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